I'm a thirty-year veteran of Wall Street and an outspoken critic of ineffective regulation and an advocate for economic and political sanity. Following a career as an in-house lawyer and industry regulator, I am now in private practice representing member firms, registered persons, Whistleblowers, and defrauded investors. I publish the RRBDlaw.com and the BrokeAndBroker.com websites.

Given the inflammatory and derisive nature of much of this Decision’s content, I have opted to present the following solely in the form of verbatim selections from the 25-page Arbitrator’s Report and will leave it to my astute readers to draw the necessary inferences:

Here, it was undisputed that Wilder signed an Employee Agreement with Fidelity that contained legally binding non-solicitation as well as confidentiality clauses. The confidentiality clause explicitly stated that Fidelity considered customer lists — including customer contact information — to be its trade secret information. Wilder further signed and acknowledged receipt of a Summary and Acknowledgment form that clearly restated that the customer information enumerated therein was proprietary. Thus, Fidelity clearly asserted trade secret/confidential status in its customer contact information. As such. Wilder was on notice that Fidelity considered this information to be confidential and proprietary.

. . .

First, email documentation sent by Wilder contradicts or is inconsistent with this assertion. Second, the testimony that every single client on the list of customers to whom he sent an overnight package requested the enclosed ACAT forms strains credulity (particularly since most of these customers did not actually transfer their accounts). Third, MSSB provided substantial financial incentives to Wilder to encourage him to bring the Fidelity customers to MSSB. Evidence on the record, including documents admitted with regard to the seven accounts that transferred, clearly indicated that Wilder went far beyond the permissible bounds of simply announcing his new affiliation to his clients by providing only his new contact information.

. . .

However, as a non-signatory. Fidelity’s customer contact information remains a legally protected trade secret. When a Fidelity broker leaves to work for a Protocol firm, Fidelity’s proprietary customer information does not thereby lose its confidential status, become vitiated and converted into a Protocol-compliant list, which the ex-Fidelity broker can then use to freely solicit Fidelity customers. Yet, this is exactly the position MSSB has adopted in this case.

. .

The fundamental unfairness in this case is the imposition of an uneven playing field by MSSB. In light of the fact that MSSB knew full well that, as a non-signatory, the terms of the Protocol were inapplicable to Fidelity, the heads I win, tails you lose posture adopted by MSSB with regard to its selective use of the terms of the Protocol was particularly opprobrious.

When it suited MSSB’s purposes, they invoked those aspects of the Protocol that were advantageous to their interests, namely encouraging the theft of a non-Protocol firms proprietary customer lists by contending that these lists, by the very terms of the Protocol and Massachusetts law permitting announcements, can’t be trade secrets, and that the Protocol recruiting methods employed represent best or industry practices. But they didn’t comply with those mandatory provisions of the Protocol that would be advantageous to Fidelity, namely leaving with the branch manager the customer list the broker is taking with him to a Protocol firm. Fidelity is then forced to incur costs and attorneys’ fees protecting their trade secrets, as they must, and MSSB all the while argues that the action for a TRO is for a tiny sum of money because only a small number of accounts actually transferred in this case.

. . .

In this case, the Panel was mindful of the integral nexus between MSSB and Luboja & Thau — a law firm paid by MSSB and to whom it referred Wilder as well as all but one of the Fidelity recruits in the companion cases for implementation of the “non-Protocol” recruiting strategy referenced herein. The Panel takes note of the fact that every court which considered the “non-Protocol” strategy and the legal issues incidental thereto, including the trade secret status of Fidelity’s customer contact information as well as the enforceability of the non-solicitation clauses in the former Fidelity brokers’ Employee Agreements, rejected the legitimacy of that strategy.

The subterfuge employed by MSSB, as delineated above, was made all the more egregious by the fact that the theft of Fidelity’s trade secret customer information placed Fidelity in the untenable position of inadvertently violating SEC Regulation SP. Fidelity’s Chief Privacy Officer testified that the removal of Fidelity’s customer list violated federal securities regulations, and this testimony was unrebutted by MSSB.

. . .

The modus operandi of MSSB is evident: make the protection of its trade secret customer information enormously expensive for Fidelity, and then argue to arbitration panel(s) that the damages at stake are ininiscule. Any awards assessed against MSSB are simply viewed by it as the cost of doing business. The Panel observes that the remorseless litigation posture adopted by MSSB in this case is consistent with its conscious business policy to make Fidelity’s protection of its trade secrets as costly as possible. Given the dynamics of the litigation/arbitration process for a party seeking injunctive relief with all its attendant and requisite procedures, the cost/benefit ratio has been decidedly favorable to MSSB.

The Panel’s award of attorneys’ fees is an attempt to address these inequities and to redress the remedial imbalance inherent when Fidelity, a non-Protocol firm, seeks to thwart the repeated attempts by MSSB, a signatory firm, from pilfering its trade secrets and unlawfully soliciting its customers. Such an equitable reapportionment of the attomeys’ fees incurred by Fidelity will force MSSB to reassess the financial viability of the cost/benefit calculus they have previously employed.

. . .

The conduct engaged in by MSSB in this case represents an unfair method of competition in the securities industry precisely because it attempted, either explicitly, implicitly or through nefarious and surreptitious means, to impose upon Fidelity, a non-Protocol firm, mles of commerce by which it never agreed to be bound. This isn’t fair competition; it’s an illicit and improper rigging of the rules — a stacking of the deck — to favor one competitor over another.

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